Cash out refinance

It is a refinance in which the new loan is larger than the one it replaces, with the difference released to you in cash. Equity is the gap between what your property is worth and what you owe, and a cash out turns part of that gap into usable funds. It is subject to lender approval and a valuation.

Less than the equity you hold, and how much less depends on the lender's limits and the valuation it accepts. Where the new loan leaves you with under twenty per cent equity, lenders mortgage insurance can apply again. We work out the realistic figure across the panel before you apply.

Renovations, an investment deposit, paying out other debts and other documented purposes are all common. Lenders treat the purpose seriously and read a renovation differently to an investment deposit or general personal use. Which lender suits you depends largely on what the money is for, so it is the first thing we ask.

Yes, and you generally have to evidence it. Quotes for work, a contract of sale, statements for debts being paid out, or a written explanation are all typical. How much documentation a lender wants before releasing funds varies across the panel, which is part of why the lender choice matters.

Almost always, because the amount released is set by the property's value rather than by your estimate of it. The lender orders the valuation and the figure it accepts is the one that counts. If it lands lower than expected, the available equity falls with it and we look at the rest of the panel.

Tax treatment follows what the borrowed money is used for rather than what secures it, so equity released for a private purpose is treated differently to equity released for an investment. That call belongs with your accountant. We split the released funds from your existing balance so the two purposes stay separate on paper.

A cash out releases a set amount as a lump sum at settlement. A line of credit gives you a limit you draw on as you need it, and you are charged interest only on what has been drawn. Which one fits depends on whether you need the whole amount at once or in stages.

When a structural renovation would be better funded by a construction loan with staged drawdowns, when the amount released is small enough that switching costs swallow the benefit, when mortgage insurance would be triggered again, when servicing on the larger loan would not pass, or when the money is for something you will have spent long before the loan is repaid.